[G.R. NO.

152318 : April 16, 2009]

DEUTSCHE GESELLSCHAFT FR TECHNISCHE
ZUSAMMENARBEIT, also known as GERMAN AGENCY FOR
TECHNICAL COOPERATION, (GTZ) HANS PETER PAULENZ and
ANNE NICOLAY, Petitioners, v. HON. COURT OF APPEALS, HON.
ARIEL CADIENTE SANTOS, Labor Arbiter of the Arbitration
Branch, National Labor Relations Commission, and
BERNADETTE CARMELLA MAGTAAS, CAROLINA DIONCO,
CHRISTOPHER RAMOS, MELVIN DELA PAZ, RANDY TAMAYO
and EDGARDO RAMILLO, Respondents.
DECISION
TINGA, J.:
On 7 September 1971, the governments of the Federal Republic of
Germany and the Republic of the Philippines ratified an Agreement
concerning Technical Co-operation (Agreement) in Bonn, capital of
what was then West Germany. The Agreement affirmed the
countries' "common interest in promoting the technical and
economic development of their States, and recogni[zed] the
benefits to be derived by both States from closer technical cooperation," and allowed for the conclusion of "arrangements
concerning individual projects of technical co-operation."1 While the
Agreement provided for a limited term of effectivity of five (5)
years, it nonetheless was stated that "[t]he Agreement shall be
tacitly extended for successive periods of one year unless either of
the two Contracting Parties denounces it in writing three months
prior to its expiry," and that even upon the Agreement's expiry, its
provisions would "continue to apply to any projects agreed upon x x
x until their completion."2
On 10 December 1999, the Philippine government, through then
Foreign Affairs Secretary Domingo Siazon, and the German
government, agreed to an Arrangement in furtherance of the 1971
Agreement. This Arrangement affirmed the common commitment of

both governments to promote jointly a project called, Social Health

Insurance Networking and Empowerment (SHINE), which was
designed to "enable Philippine families'especially poor ones'to
maintain their health and secure health care of sustainable
quality."3 It appears that SHINE had already been in existence even
prior to the effectivity of the Arrangement, though the record does
not indicate when exactly SHINE was constituted. Nonetheless, the
Arrangement stated the various obligations of the Filipino and
German governments. The relevant provisions of the Arrangement
are reproduced as follows:
3. The Government of the Federal Republic of Germany shall make
the following contributions to the project.
It shall
(a) second
- one expert in health economy, insurance and health systems for
up to 48 expert/months,
- one expert in system development for up to 10 expert/months
- short-term experts to deal with special tasks for a total of up to 18
expert/months,
- project assistants/guest students as required, who shall work on
the project as part of their basic and further training and assume
specific project tasks under the separately financed junior staff
promotion programme of the Deutsche Gesellschaft fr Technische
Zusammenarbeit (GTZ);
(b) provide in situ
- short-term experts to deal with diverse special tasks for a total of
up to 27 expert/months,

- five local experts in health economy, health insurance, community

health systems, information technology, information systems,
training and community mobilization for a total of up to 240
expert/months,
- local and auxiliary personnel for a total of up to 120 months;
(c) supply inputs, in particular
- two cross-country vehicles,
- ten computers with accessories,
- office furnishings and equipment
up to a total value of DM 310,000 (three hundred and ten thousand
Deutsche Mark);
(c) meet
- the cost of accommodation for the seconded experts and their
families in so far as this cost is not met by the seconded experts
themselves,
- the cost of official travel by the experts referred to in subparagraph (a) above within and outside the Republic of the
Philippines,
- the cost of seminars and courses,
- the cost of transport and insurance to the project site of inputs to
be supplied pursuant to sub-paragraph (c) above, excluding the
charges and storage fees referred to in paragraph 4(d) below,
- a proportion of the operating and administrative costs;
xxx
4. The Government of the Republic of the Philippines shall make the
following contributions to the project:

It shall
(a) - provide the necessary Philippine experts for the project, in
particular one project coordinator in the Philippine Health Insurance
Corporation (Philhealth), at least three further experts and a
sufficient number of administrative and auxiliary personnel, as well
as health personnel in the pilot provinces and in the other project
partners, in particular one responsible expert for each pilot province
and for each association representing the various target groups,
- release suitably qualified experts from their duties for attendance
at the envisaged basic and further training activities; it shall only
nominate such candidates as have given an undertaking to work on
the project for at least five years after completing their training and
shall ensure that these Philippine experts receive appropriate
remuneration,
- ensure that the project field offices have sufficient expendables,
- make available the land and buildings required for the project;
(b) assume an increasing proportion of the running and operating
costs of the project;
(c) afford the seconded experts any assistance they may require in
carrying out the tasks assigned to them and place at their disposal
all necessary records and documents;
(d) guarantee that
- the project is provided with an itemized budget of its own in order
to ensure smooth continuation of the project.
- the necessary legal and administrative framework is created for
the project,
- the project is coordinated in close cooperation with other national
and international agencies relevant to implementation,

- the inputs supplied for the project on behalf of the Government of

the Federal Republic of Germany are exempted from the cost of
licenses, harbour dues, import and export duties and other public
charges and fees, as well as storage fees, or that any costs thereof
are met, and that they are cleared by customs without delay. The
aforementioned exemptions shall, at the request of the
implementing agencies also apply to inputs procured in the Republic
of the Philippines,
- the tasks of the seconded experts are taken over as soon as
possible by Philippine experts,
- examinations passed by Philippine nationals pursuant to this
Arrangement are recognized in accordance with their respective
standards and that the persons concerned are afforded such
opportunities with regard to careers, appointments and
advancement as are commensurate with their training.4
In the arraignment, both governments likewise named their
respective implementing organizations for SHINE. The Philippines
designated the Department of Health (DOH) and the Philippine
Health Insurance Corporation (Philhealth) with the implementation
of SHINE. For their part, the German government "charge[d] the
Deustche Gesellschaft fr Technische Zusammenarbeit[5] (GTZ[6])
GmbH, Eschborn, with the implementation of its contributions."7
Private respondents were engaged as contract employees hired by
GTZ to work for SHINE on various dates between December of 1998
to September of 1999. Bernadette Carmela Magtaas was hired as an
"information systems manager and project officer of
SHINE;"8Carolina Dionco as a "Project Assistant of
SHINE;"9 Christopher Ramos as "a project assistant and liason
personnel of NHI related SHINE activities by GTZ;"10 Melvin Dela Paz
and Randy Tamayo as programmers;11 and Edgardo Ramilo as
"driver, messenger and multipurpose service man."12 The
employment contracts of all six private respondents all specified Dr.
Rainer Tollkotter, identified as an adviser of GTZ, as the "employer."

At the same time, all the contracts commonly provided that "[i]t is
mutually agreed and understood that [Dr. Tollkotter, as employer] is
a seconded GTZ expert who is hiring the Employee on behalf of GTZ
and for a Philippine-German bilateral project named 'Social Health
Insurance Networking and Empowerment (SHINE)' which will end at
a given time."13
In September of 1999, Anne Nicolay (Nicolay), a Belgian national,
assumed the post of SHINE Project Manager. Disagreements
eventually arose between Nicolay and private respondents in
matters such as proposed salary adjustments, and the course
Nicolay was taking in the implementation of SHINE different from
her predecessors. The dispute culminated in a letter14 dated 8 June
2000, signed by the private respondents, addressed to Nicolay, and
copies furnished officials of the DOH, Philheath, and the director of
the Manila office of GTZ. The letter raised several issues which
private respondents claim had been brought up several times in the
past, but have not been given appropriate response. It was claimed
that SHINE under Nicolay had veered away from its original purpose
to facilitate the development of social health insurance by shoring
up the national health insurance program and strengthening local
initiatives, as Nicolay had refused to support local partners and new
initiatives on the premise that community and local government unit
schemes were not sustainable a philosophy that supposedly
betrayed Nicolay's lack of understanding of the purpose of the
project. Private respondents further alleged that as a result of
Nicolay's "new thrust, resources have been used inappropriately;"
that the new management style was "not congruent with the
original goals of the project;" that Nicolay herself suffered from
"cultural insensitivity" that consequently failed to sustain healthy
relations with SHINE's partners and staff.
The letter ended with these ominous words:
The issues that we [the private respondents] have stated here are
very crucial to us in working for the project. We could no longer find

any reason to stay with the project unless ALL of these issues be
addressed immediately and appropriately.15
In response, Nicolay wrote each of the private respondents a letter
dated 21 June 2000, all similarly worded except for their respective
addressees. She informed private respondents that the "project's
orientations and evolution" were decided in consensus with partner
institutions, Philhealth and the DOH, and thus no longer subject to
modifications. More pertinently, she stated:
You have firmly and unequivocally stated in the last paragraph of
your 8th June 2000 letter that you and the five other staff "could no
longer find any reason to stay with the project unless ALL of these
issues be addressed immediately and appropriately." Under the
foregoing premises and circumstances, it is now imperative that I
am to accept your resignation, which I expect to receive as soon as
possible.16
Taken aback, private respondents replied with a common letter,
clarifying that their earlier letter was not intended as a resignation
letter, but one that merely intended to raise attention to what they
perceived as vital issues.17 Negotiations ensued between private
respondents and Nicolay, but for naught. Each of the private
respondents received a letter from Nicolay dated 11 July 2000,
informing them of the pre-termination of their contracts of
employment on the grounds of "serious and gross insubordination,
among others, resulting to loss of confidence and trust."18
On 21 August 2000, the private respondents filed a complaint for
illegal dismissal with the NLRC. Named as respondents therein
where GTZ, the Director of its Manila office Hans Peter Paulenz, its
Assistant Project Manager Christian Jahn, and Nicolay.
On 25 October 2005, GTZ, through counsel, filed a Motion to
Dismiss, on the ground that the Labor Arbiter had no jurisdiction
over the case, as its acts were undertaken in the discharge of the
governmental functions and sovereign acts of the Government of

the Federal Republic of Germany. This was opposed by private

respondents with the arguments that GTZ had failed to secure a
certification that it was immune from suit from the Department of
Foreign Affairs, and that it was GTZ and not the German
government which had implemented the SHINE Project and entered
into the contracts of employment.
On 27 November 2000, the Labor Arbiter issued an Order19 denying
the Motion to Dismiss. The Order cited, among others, that GTZ was
a private corporation which entered into an employment contract;
and that GTZ had failed to secure from the DFA a certification as to
its diplomatic status.
On 7 February 2001, GTZ filed with the Labor Arbiter a "Reiterating
Motion to Dismiss," again praying that the Motion to Dismiss be
granted on the jurisdictional ground, and reprising the arguments
for dismissal it had earlier raised.20 No action was taken by the
Labor Arbiter on this new motion. Instead, on 15 October 2001, the
Labor Arbiter rendered a Decision21 granting the complaint for illegal
dismissal. The Decision concluded that respondents were dismissed
without lawful cause, there being "a total lack of due process both
substantive and procedural [sic]."22 GTZ was faulted for failing to
observe the notice requirements in the labor law. The Decision
likewise proceeded from the premise that GTZ had treated the letter
dated 8 June 2000 as a resignation letter, and devoted some focus
in debunking this theory.
The Decision initially offered that it "need not discuss the
jurisdictional aspect considering that the same had already been
lengthily discussed in the Order de[n]ying respondents' Motion to
Dismiss."23 Nonetheless, it proceeded to discuss the jurisdictional
aspect, in this wise:
Under pain of being repetitious, the undersigned Labor Arbiter has
jurisdiction to entertain the complaint on the following grounds:

Firstly, under the employment contract entered into between

complainants and respondents, specifically Section 10 thereof, it
provides that "contract partners agree that his contract shall be
subject to the LAWS of the jurisdiction of the locality in which the
service is performed."
Secondly, respondent having entered into contract, they can no
longer invoke the sovereignty of the Federal Republic of Germany.
Lastly, it is imperative to be immune from suit, respondents should
have secured from the Department of Foreign Affairs a certification
of respondents' diplomatic status and entitlement to diplomatic
privileges including immunity from suits. Having failed in this
regard, respondents cannot escape liability from the shelter of
sovereign immunity.[sic]24
Notably, GTZ did not file a motion for reconsideration to the Labor
Arbiter's Decision or elevate said decision for appeal to the NLRC.
Instead, GTZ opted to assail the decision by way of a special civil
action for certiorari filed with the Court of Appeals.25 On 10
December 2001, the Court of Appeals promulgated a
Resolution26 dismissing GTZ's petition, finding that "judicial recourse
at this stage of the case is uncalled for[,] [t]he appropriate remedy
of the petitioners [being] an appeal to the NLRC x x x."27 A motion
for reconsideration to this Resolution proved fruitless for GTZ.28
Thus, the present Petition for Review under Rule 45, assailing the
decision and resolutions of the Court of Appeals and of the Labor
Arbiter. GTZ's arguments center on whether the Court of Appeals
could have entertained its petition for certiorari despite its not
having undertaken an appeal before the NLRC; and whether the
complaint for illegal dismissal should have been dismissed for lack
of jurisdiction on account of GTZ's insistence that it enjoys immunity
from suit. No special arguments are directed with respect to
petitioners Hans Peter Paulenz and Anne Nicolay, respectively the
then Director and the then Project Manager of GTZ in the

Philippines; so we have to presume that the arguments raised in

behalf of GTZ's alleged immunity from suit extend to them as well.
The Court required the Office of the Solicitor General (OSG) to file a
Comment on the petition. In its Comment dated 7 November 2005,
the OSG took the side of GTZ, with the prayer that the petition be
granted on the ground that GTZ was immune from suit, citing in
particular its assigned functions in implementing the SHINE program
a joint undertaking of the Philippine and German governments
which was neither proprietary nor commercial in nature.
The Court of Appeals had premised the dismissal of GTZ's petition
on its procedural misstep in bypassing an appeal to NLRC and
challenging the Labor Arbiter's Decision directly with the appellate
court by way of a Rule 65 petition. In dismissing the petition, the
Court of Appeals relied on our ruling in Air Service Cooperative v.
Court of Appeals.29 The central issue in that case was whether a
decision of a Labor Arbiter rendered without jurisdiction over the
subject matter may be annulled in a petition before a Regional Trial
Court. That case may be differentiated from the present case, since
the Regional Trial Court does not have original or appellate
jurisdiction to review a decision rendered by a Labor Arbiter. In
contrast, there is no doubt, as affirmed by jurisprudence, that the
Court of Appeals has jurisdiction to review, by way of its
original certiorari jurisdiction, decisions ruling on complaints for
illegal dismissal.
Nonetheless, the Court of Appeals is correct in pronouncing the
general rule that the proper recourse from the decision of the Labor
Arbiter is to first appeal the same to the NLRC. Air Services is in fact
clearly detrimental to petitioner's position in one regard. The Court
therein noted that on account of the failure to correctly appeal the
decision of the Labor Arbiter to the NLRC, such judgment
consequently became final and executory.30GTZ goes as far as to
"request" that the Court re-examine Air Services, a suggestion that
is needlessly improvident under the circumstances. Air

Services affirms doctrines grounded in sound procedural rules that

have allowed for the considered and orderly disposition of labor
cases.
The OSG points out, citing Heirs of Mayor Nemencio Galvez v. Court
of Appeals,31 that even when appeal is available, the Court has
nonetheless allowed a writ of certiorari when the orders of the lower
court were issued either in excess of or without jurisdiction. Indeed,
the Court has ruled before that the failure to employ available
intermediate recourses, such as a motion for reconsideration, is not
a fatal infirmity if the ruling assailed is a patent nullity. This
approach suggested by the OSG allows the Court to inquire directly
into what is the main issue whether GTZ enjoys immunity from suit.
The arguments raised by GTZ and the OSG are rooted in several
indisputable facts. The SHINE project was implemented pursuant to
the bilateral agreements between the Philippine and German
governments. GTZ was tasked, under the 1991 agreement, with the
implementation of the contributions of the German government. The
activities performed by GTZ pertaining to the SHINE project are
governmental in nature, related as they are to the promotion of
health insurance in the Philippines. The fact that GTZ entered into
employment contracts with the private respondents did not
disqualify it from invoking immunity from suit, as held in cases such
as Holy See v. Rosario, Jr.,32 which set forth what remains valid
doctrine:
Certainly, the mere entering into a contract by a foreign state with a
private party cannot be the ultimate test. Such an act can only be
the start of the inquiry. The logical question is whether the foreign
state is engaged in the activity in the regular course of business. If
the foreign state is not engaged regularly in a business or trade, the
particular act or transaction must then be tested by its nature. If
the act is in pursuit of a sovereign activity, or an incident thereof,
then it is an act jure imperii, especially when it is not undertaken for
gain or profit.33

Beyond dispute is the tenability of the comment points raised by

GTZ and the OSG that GTZ was not performing proprietary
functions notwithstanding its entry into the particular employment
contracts. Yet there is an equally fundamental premise which GTZ
and the OSG fail to address, namely: Is GTZ, by conception, able to
enjoy the Federal Republic's immunity from suit?
cralawre d

The principle of state immunity from suit, whether a local state or a

foreign state, is reflected in Section 9, Article XVI of the
Constitution, which states that "the State may not be sued without
its consent." Who or what consists of "the State"? For one, the
doctrine is available to foreign States insofar as they are sought to
be sued in the courts of the local State,34 necessary as it is to avoid
"unduly vexing the peace of nations."
If the instant suit had been brought directly against the Federal
Republic of Germany, there would be no doubt that it is a suit
brought against a State, and the only necessary inquiry is whether
said State had consented to be sued. However, the present suit was
brought against GTZ. It is necessary for us to understand what
precisely are the parameters of the legal personality of GTZ.
Counsel for GTZ characterizes GTZ as "the implementing agency of
the Government of the Federal Republic of Germany," a depiction
similarly adopted by the OSG. Assuming that characterization is
correct, it does not automatically invest GTZ with the ability to
invoke State immunity from suit. The distinction lies in whether the
agency is incorporated or unincorporated. The following lucid
discussion from Justice Isagani Cruz is pertinent:
Where suit is filed not against the government itself or its officials
but against one of its entities, it must be ascertained whether or not
the State, as the principal that may ultimately be held liable, has
given its consent to be sued. This ascertainment will depend in the
first instance on whether the government agency impleaded is
incorporated or unincorporated.

An incorporated agency has a charter of its own that invests it with

a separate juridical personality, like the Social Security System, the
University of the Philippines, and the City of Manila. By contrast, the
unincorporated agency is so called because it has no separate
juridical personality but is merged in the general machinery of the
government, like the Department of Justice, the Bureau of Mines
and the Government Printing Office.
If the agency is incorporated, the test of its suability is found in its
charter. The simple rule is that it is suable if its charter says so, and
this is true regardless of the functions it is performing. Municipal
corporations, for example, like provinces and cities, are agencies of
the State when they are engaged in governmental functions and
therefore should enjoy the sovereign immunity from suit.
Nevertheless, they are subject to suit even in the performance of
such functions because their charter provides that they can sue and
be sued.35
State immunity from suit may be waived by general or special
law.36 The special law can take the form of the original charter of the
incorporated government agency. Jurisprudence is replete with
examples of incorporated government agencies which were ruled
not entitled to invoke immunity from suit, owing to provisions in
their
charters manifesting their consent to be sued. These include the
National Irrigation Administration,37 the former Central Bank,38 and
the National Power Corporation.39 In SSS v. Court of Appeals,40 the
Court through Justice Melencio-Herrera explained that by virtue of
an express provision in its charter allowing it to sue and be sued,
the Social Security System did not enjoy immunity from suit:
We come now to the amendability of the SSS to judicial action and
legal responsibility for its acts. To our minds, there should be no
question on this score considering that the SSS is a juridical entity
with a personality of its own. It has corporate powers separate and
distinct from the Government. SSS' own organic act specifically

provides that it can sue and be sued in Court. These words "sue and
be sued" embrace all civil process incident to a legal action. So that,
even assuming that the SSS, as it claims, enjoys immunity from suit
as an entity performing governmental functions, by virtue of the
explicit provision of the aforecited enabling law, the Government
must be deemed to have waived immunity in respect of the SSS,
although it does not thereby concede its liability. That statutory law
has given to the private citizen a remedy for the enforcement and
protection of his rights. The SSS thereby has been required to
submit to the jurisdiction of the Courts, subject to its right to
interpose any lawful defense. Whether the SSS performs
governmental or proprietary functions thus becomes unnecessary to
belabor. For by that waiver, a private citizen may bring a suit against
it for varied objectives, such as, in this case, to obtain
compensation in damages arising from contract, and even for tort.
A recent case squarely in point anent the principle, involving the
National Power Corporation, is that of Rayo v. Court of First Instance
of Bulacan, 110 SCRA 457 (1981), wherein this Court, speaking
through Mr. Justice Vicente Abad Santos, ruled:
"It is not necessary to write an extended dissertation on whether or
not the NPC performs a governmental function with respect to the
management and operation of the Angat Dam. It is sufficient to say
that the government has organized a private corporation, put
money in it and has allowed it to sue and be sued in any court
under its charter. (R.A. No. 6395, Sec. 3[d]). As a government,
owned and controlled corporation, it has a personality of its own,
distinct and separate from that of the Government. Moreover, the
charter provision that the NPC can 'sue and be sued in any court' is
without qualification on the cause of action and accordingly it can
include a tort claim such as the one instituted by the petitioners."41
It is useful to note that on the part of the Philippine government, it
had designated two entities, the Department of Health and the
Philippine Health Insurance Corporation (PHIC), as the
implementing agencies in behalf of the Philippines. The PHIC was

established under Republic Act No. 7875, Section 16(g) of which

grants the corporation the power "to sue and be sued in court."
Applying the previously cited jurisprudence, PHIC would not enjoy
immunity from suit even in the performance of its functions
connected with SHINE, however, governmental in nature as they
may be.
Is GTZ an incorporated agency of the German government? There is
some mystery surrounding that question. Neither GTZ nor the OSG
go beyond the claim that petitioner is "the implementing agency of
the Government of the Federal Republic of Germany." On the other
hand, private respondents asserted before the Labor Arbiter that
GTZ was "a private corporation engaged in the implementation of
development projects."42 The Labor Arbiter accepted that claim in
his Order denying the Motion to Dismiss,43 though he was silent on
that point in his Decision. Nevertheless, private respondents argue
in their Comment that the finding that GTZ was a private
corporation "was never controverted, and is therefore deemed
admitted."44 In its Reply, GTZ controverts that finding, saying that it
is a matter of public knowledge that the status of petitioner GTZ is
that of the "implementing agency," and not that of a private
corporation.45
In truth, private respondents were unable to adduce any evidence
to substantiate their claim that GTZ was a "private corporation," and
the Labor Arbiter acted rashly in accepting such claim without
explanation. But neither has GTZ supplied any evidence defining its
legal nature beyond that of the bare descriptive "implementing
agency." There is no doubt that the 1991 Agreement designated
GTZ as the "implementing agency" in behalf of the German
government. Yet the catch is that such term has no precise
definition that is responsive to our concerns. Inherently, an agent
acts in behalf of a principal, and the GTZ can be said to act in behalf
of the German state. But that is as far as "implementing agency"
could take us. The term by itself does not supply whether GTZ is
incorporated or unincorporated, whether it is owned by the German

state or by private interests, whether it has juridical personality

independent of the German government or none at all.
GTZ itself provides a more helpful clue, inadvertently, through its
own official Internet website.46 In the "Corporate Profile" section of
the English language version of its site, GTZ describes itself as
follows:
As an international cooperation enterprise for sustainable
development with worldwide operations, the federally owned
Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ) GmbH
supports the German Government in achieving its developmentpolicy objectives. It provides viable, forward-looking solutions for
political, economic, ecological and social development in a
globalised world. Working under difficult conditions, GTZ promotes
complex reforms and change processes. Its corporate objective is to
improve people's living conditions on a sustainable basis.
GTZ is a federal enterprise based in Eschborn near Frankfurt am
Main. It was founded in 1975 as a company under private law. The
German Federal Ministry for Economic Cooperation and
Development (BMZ) is its major client. The company also operates
on behalf of other German ministries, the governments of other
countries and international clients, such as the European
Commission, the United Nations and the World Bank, as well as on
behalf of private enterprises. GTZ works on a public-benefit basis.
All surpluses generated are channeled [sic] back into its own
international cooperation projects for sustainable development.47
GTZ's own website elicits that petitioner is "federally owned," a
"federal enterprise," and "founded in 1975 as a company under
private law." GTZ clearly has a very meaningful relationship with the
Federal Republic of Germany, which apparently owns it. At the same
time, it appears that GTZ was actually organized not through a
legislative public charter, but under private law, in the same way
that Philippine corporations can be organized under the Corporation
Code even if fully owned by the Philippine government.

This self-description of GTZ in its own official website gives further

cause for pause in adopting petitioners' argument that GTZ is
entitled to immunity from suit because it is "an implementing
agency." The above-quoted statement does not dispute the
characterization of GTZ as an "implementing agency of the Federal
Republic of Germany," yet it bolsters the notion that as a company
organized under private law, it has a legal personality independent
of that of the Federal Republic of Germany.
The Federal Republic of Germany, in its own official website,48 also
makes reference to GTZ and describes it in this manner:
x x x Going by the principle of "sustainable development," the
German Technical Cooperation (Deutsche Gesellschaft fr
Technische Zusammenarbeit GmbH, GTZ) takes on non-profit
projects in international "technical cooperation." The GTZ is a
private company owned by the Federal Republic of Germany.49
Again, we are uncertain of the corresponding legal implications
under German law surrounding "a private company owned by the
Federal Republic of Germany." Yet taking the description on face
value, the apparent equivalent under Philippine law is that of a
corporation organized under the Corporation Code but owned by the
Philippine government, or a government-owned or controlled
corporation without original charter. And it bears notice that Section
36 of the Corporate Code states that "[e]very corporation
incorporated under this Code has the power and capacity x x x to
sue and be sued in its corporate name."50
It is entirely possible that under German law, an entity such as GTZ
or particularly GTZ itself has not been vested or has been
specifically deprived the power and capacity to sue and/or be sued.
Yet in the proceedings below and before this Court, GTZ has failed
to establish that under German law, it has not consented to be sued
despite it being owned by the Federal Republic of Germany. We
adhere to the rule that in the absence of evidence to the contrary,

foreign laws on a particular subject are presumed to be the same as

those of the Philippines,51 and following the most intelligent
assumption we can gather, GTZ is akin to a governmental owned or
controlled corporation without original charter which, by virtue of
the Corporation Code, has expressly consented to be sued. At the
very least, like the Labor Arbiter and the Court of Appeals, this
Court has no basis in fact to conclude or presume that GTZ enjoys
immunity from suit.
This absence of basis in fact leads to another important point,
alluded to by the Labor Arbiter in his rulings. Our ruling in Holy See
v. Del Rosario52 provided a template on how a foreign entity desiring
to invoke State immunity from suit could duly prove such immunity
before our local courts. The principles enunciated in that case were
derived from public international law. We stated then:
In Public International Law, when a state or international agency
wishes to plead sovereign or diplomatic immunity in a foreign court,
it requests the Foreign Office of the state where it is sued to convey
to the court that said defendant is entitled to immunity.
In the United States, the procedure followed is the process of
"suggestion," where the foreign state or the international
organization sued in an American court requests the Secretary of
State to make a determination as to whether it is entitled to
immunity. If the Secretary of State finds that the defendant is
immune from suit, he, in turn, asks the Attorney General to submit
to the court a "suggestion" that the defendant is entitled to
immunity. In England, a similar procedure is followed, only the
Foreign Office issues a certification to that effect instead of
submitting a "suggestion" (O'Connell, I International Law 130
[1965]; Note: Immunity from Suit of Foreign Sovereign
Instrumentalities and Obligations, 50 Yale Law Journal 1088
[1941]).
In the Philippines, the practice is for the foreign government or the
international organization to first secure an executive endorsement

of its claim of sovereign or diplomatic immunity. But how the

Philippine Foreign Office conveys its endorsement to the courts
varies. In International Catholic Migration Commission v. Calleja,
190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a
letter directly to the Secretary of Labor and Employment, informing
the latter that the respondent-employer could not be sued because
it enjoyed diplomatic immunity. In World Health Organization v.
Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent
the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1
(1974), the U.S. Embassy asked the Secretary of Foreign Affairs to
request the Solicitor General to make, in behalf of the Commander
of the United States Naval Base at Olongapo City, Zambales, a
"suggestion" to respondent Judge. The Solicitor General embodied
the "suggestion" in a Manifestation and Memorandum as amicus
curiae.53
It is to be recalled that the Labor Arbiter, in both of his rulings,
noted that it was imperative for petitioners to secure from the
Department of Foreign Affairs "a certification of respondents'
diplomatic status and entitlement to diplomatic privileges including
immunity from suits."54 The requirement might not necessarily be
imperative. However, had GTZ obtained such certification from the
DFA, it would have provided factual basis for its claim of immunity
that would, at the very least, establish a disputable evidentiary
presumption that the foreign party is indeed immune which the
opposing party will have to overcome with its own factual evidence.
We do not see why GTZ could not have secured such certification or
endorsement from the DFA for purposes of this case. Certainly, it
would have been highly prudential for GTZ to obtain the same after
the Labor Arbiter had denied the motion to dismiss. Still, even at
this juncture, we do not see any evidence that the DFA, the office of
the executive branch in charge of our diplomatic relations, has
indeed endorsed GTZ's claim of immunity. It may be possible that
GTZ tried, but failed to secure such certification, due to the same
concerns that we have discussed herein.

Would the fact that the Solicitor General has endorsed GTZ's claim
of State's immunity from suit before this Court sufficiently
substitute for the DFA certification? Note that the rule in public
international law quoted in Holy See referred to endorsement by the
Foreign Office of the State where the suit is filed, such foreign office
in the Philippines being the Department of Foreign Affairs. Nowhere
in the Comment of the OSG is it manifested that the DFA has
endorsed GTZ's claim, or that the OSG had solicited the DFA's views
on the issue. The arguments raised by the OSG are virtually the
same as the arguments raised by GTZ without any indication of any
special and distinct perspective maintained by the Philippine
government on the issue. The Comment filed by the OSG does not
inspire the same degree of confidence as a certification from the
DFA would have elicited.
chanrobles virtual law library

Holy See made reference to Baer v. Tizon,55 and that in the said
case, the United States Embassy asked the Secretary of Foreign
Affairs to request the Solicitor General to make a "suggestion" to
the trial court, accomplished by way of a Manifestation and
Memorandum, that the petitioner therein enjoyed immunity as the
Commander of the Subic Bay Naval Base. Such circumstance is
actually not narrated in the text of Baer itself and was likely
supplied in Holy See because its author, Justice Camilio Quiason,
had appeared as the Solicitor in behalf of the OSG in Baer.
Nonetheless, as narrated in Holy See, it was the Secretary of
Foreign Affairs which directed the OSG to intervene in behalf of the
United States government in the Baer case, and such fact is
manifest enough of the endorsement by the Foreign Office. We do
not find a similar circumstance that bears here.
The Court is thus holds and so rules that GTZ consistently has been
unable to establish with satisfaction that it enjoys the immunity
from suit generally enjoyed by its parent country, the Federal
Republic of Germany. Consequently, both the Labor Arbiter and the
Court of Appeals acted within proper bounds when they refused to
acknowledge that GTZ is so immune by dismissing the complaint
against it. Our finding has additional ramifications on the failure of

GTZ to properly appeal the Labor Arbiter's decision to the NLRC. As

pointed out by the OSG, the direct recourse to the Court of Appeals
while bypassing the NLRC could have been sanctioned had the Labor
Arbiter's decision been a "patent nullity." Since the Labor Arbiter
acted properly in deciding the complaint, notwithstanding GTZ's
claim of immunity, we cannot see how the decision could have
translated into a "patent nullity."
As a result, there was no basis for petitioners in foregoing the
appeal to the NLRC by filing directly with the Court of Appeals the
petition for certiorari . It then follows that the Court of Appeals
acted correctly in dismissing the petition on that ground. As a
further consequence, since petitioners failed to perfect an appeal
from the Labor Arbiter's Decision, the same has long become final
and executory. All other questions related to this case, such as
whether or not private respondents were illegally dismissed, are no
longer susceptible to review, respecting as we do the finality of the
Labor Arbiter's Decision.
A final note. This decision should not be seen as deviation from the
more common methodology employed in ascertaining whether a
party enjoys State immunity from suit, one which focuses on the
particular functions exercised by the party and determines whether
these are proprietary or sovereign in nature. The nature of the acts
performed by the entity invoking immunity remains the most
important barometer for testing whether the privilege of State
immunity from suit should apply. At the same time, our Constitution
stipulates that a State immunity from suit is conditional on its
withholding of consent; hence, the laws and circumstances
pertaining to the creation and legal personality of an instrumentality
or agency invoking immunity remain relevant. Consent to be sued,
as exhibited in this decision, is often conferred by the very same
statute or general law creating the instrumentality or agency.
WHEREFORE, the petition is DENIED. No pronouncement as to
costs.

SO ORDERED.